Fundraising in a Downturn

In the past several months, there have been major ripples going through the entrepreneurial ecosystem due to the unfavorable economic climate. Warnings of lower valuations, fundraising challenges and having enough cash to last at least 24-36 months were all over the news. The most well-known being the Y Combinator letter to its founders. If you haven’t read it, you definitely should.

During a workshop for the Clim@ Scaler Program run by Rockstart, we shared our views on fundraising in a downturn as well as key success factors for raising a larger funding round.

Fundraising in unfavorable economic times definitely brings several challenges. We have experienced them firsthand with our customers. The inflated valuations we have seen in the past 10 years no longer hold ground. Investors are a lot more critical and place more emphasis on actual revenue and less on ambition. Raising a round will likely take longer in the coming period and be more grueling due to investors being more critical.

At the same time, there is also an element of self-fulfilling prophecy. The warnings lead to panic which leads to companies buckling down on costs which in turn negatively impacts other companies. The typical domino effect of which we should all be very conscious.

But we believe that it’s not all doom and gloom. Downturns also bring new opportunities. For startups who are constantly battling for top talent, hiring may become easier as large companies layoff their employees. Businesses who are prepared for the downturn and have the right strategy, can gain market share from competitors who are less prepared. And lastly, like we saw during the COVID pandemic and other crises, challenging times breed new innovations.

Finally, there will always be funding available for great companies. So, what’s the key to surviving this downturn? Make sure you have a great proposition, strong team and a solid plan with relentless execution!

Want to learn more? After the summer, we will be running the fundraising workshop as an event, so stay tuned! Interested in this workshop for your organization or want to spar on fundraising? Send us an email at hello@mastersofscale.nl.

Sign-up for our newsletter with inspirational scaling content and event invites!